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How would the auction work? For example, how often? I guess the airline need stability in their schedules. I don't know what incentivizes airports to take the "

How would the auction work? For example, how often? I guess the airline need stability in their schedules. I don't know what incentivizes airports to take the "use it or lose it" model, it I'd be curious to understand that, because it must be at the center of this. I agree of course that if a flight is happening only to maintain a slot then it's a ridiculous outcome. But as others have pointed out, there is cargo, plus pilots keeping current, plus keeping the plane in service (I dont believe you can just park a plane for months and then bring it into service again without a lot of work). Lots of procedures have been established under the premise of regular flights and it's not so simple to just rework all of them is my guess.

bobthepanda 5y ago
Airports benefit from having passengers come in, and so part of use it or lose it is ensuring that at very busy airports slots are as full as possible. Upstarts can and will take slots at such airports because they are worth their weight in gold; LHR to JFK makes $1B in annual profit for British Airways alone, for example. Airports also benefit from stability, though; airlines taking up a large percentage of traffic at a hub drive more traffic than if all those slots were split due to network effects. And to some degree people who transit airports tend to transit the same ones, so there are downsides to hectic, constant auctions of slots. The main issue is that COVID has made demand totally dry up across the board, and so the inherent assumption, that giving away a slot will bring in passenger traffic where there is none, has fallen apart.
- bberenberg 5y ago
  Can you share data source for 1B? This seems like it's 1-2 orders of magnitude off based on gut feel and I'd like to understand how I can be this far off.
  - mastercheif 5y ago
    https://www.bloomberg.com/news/articles/2021-11-07/u-s-flights-reopen-handing-british-airways-1-billion-lifeline https://www.bloomberg.com/news/articles/2021-11-07/u-s-fligh...
    - temp_praneshp 5y ago
      To answer GP, revenue, not profit. "That’s the revenue that British Airways generated each year linking its London Heathrow hub and New York John F. Kennedy International Airport, where a healthy mix of tourist and business customers made it the most lucrative route on the planet"
    - maskedinvader 5y ago
      The Bloomberg article mentions $1 Billion in revenue annually though not profit.
  - version_five 5y ago
    Just off the top of my head, one plane on a transatlantic route could be $250k+ in revenue right? So 12 flights a day would be $1Bn? A major route could have that kind of frequency. A billions dollars doesn't seem absurd.
    - loeg 5y ago
      GGP said profit, not revenue. GP is likely correct that profit would be an order of magnitude smaller.
      - version_five 5y ago
        Yeah I saw that after I posted (I misread it as revenue because that is what makes sense), I assume that's (revenue is) what the GP meant, and am realizing now that maybe the 1-2 orders magnitude comment was about the disparity between revenue and profit. The airline business is notoriously unprofitable, so yeah, the amount of revenue required to make a billion dollars profit would be something absurd, possibly more than the entire industry on many years
    - deleted 5y ago
      [deleted]
  - Nbox9 5y ago
    $1B sounds like a lot, but New York to London is probably the single most profitable plane route.
  - bobthepanda 5y ago
    I misspoke and meant revenue, but alas I can’t edit the post anymore.
diebeforei485 5y ago
Something like 5 or 10 years would work well. If an airline can't make the route work, they could then sell what's left of their slot to someone else - including to a cargo airline like DHL, FedEx, or even Amazon Air. Under the current system, legacy carriers got their slots for free or very cheap so they do wasteful things to keep their slots. They've been using smaller than optimal planes for years, and since the pandemic started the empty planes thing has gotten more common.
- deleted 5y ago
  [deleted]
Dylan16807 5y ago
Cargo, fine. Keeping pilots current and keeping planes in service? At least down to 10% slot use, I'd be surprised if that's a real issue.
WalterBright 5y ago
The beauty of using supply&demand to sort out all these conflicting priorities using price as the discriminator is it works better than any bureaucratic system ever has.
- zinekeller 5y ago
  > it works better than any bureaucratic system ever has. And there we go! While there's definitely cases where basically supply and demand trumps any other allocation system, in this case it will just kill competition and some will just hyperbole their expectations to win. Look at the UK's defunct rail franchising system where pure money play was used (they somehow always fails because they overbid).
  - WalterBright 5y ago
    Any outfit going bankrupt buying landing slots will have those slots then sold to the next lowest bidder by the outfit's creditors. There are many stories of governments trying to half-bake a market system resulting in failure. You have to set that against the absurd result of 18,000 empty flights of a fully regulated system.
  - vidarh 5y ago
    While I'm all for taking UK trains back under public control, note that one of the problems with the existing rail franchising system is that the franchise operators have almost no skin in the game. The trains and tracks are owned and operated by other companies. The franchise operators tends to be subsidiaries set up with very few assets, and can just be shut down if they fail. And while narrow margins of errors relative to their projections cause many of them to fail, when they succeed the profit relative to the actual investment made by the parent companies can be huge. The incentives structure has been all wrong in that there is basically no penalty for the parent companies in taking outsize risks and underfunding the operations and then walking away if they fail. Align those incentives and the rail franchising will likely still have issues but nowhere near as bad as today. E.g. if Deutsche Bahn faced having Arriva (their subsidiary which owns it's UK train operating companies) or themselves having to actually put up financial guarantees for the full period and facing long term effects on their ability to bid for future franchises, their bids would look very different. Put another way: When Virgin and Stagecoach were actually held to reasonable standards (being expected to actually properly fund pensions? the horror) which led to Stagecoach being disqualified from several bids they caused a massive stink and Virgin Trains closed.
jhoechtl 5y ago
> I don't know what incentivizes airports to take the "use it or lose it" model AFAIK airports charge airlines start and landing fees. By threatening airlines to loose their slots they ensure their steady revenue stream.
- bobthepanda 5y ago
  They do make money off of those, but they also make money off of all the people traveling through and purchasing duty-free or airport food and drinks and what have you. In 2019, Heathrow’s retail revenues were £722M, out of £3B in total revenue. https://www.moodiedavittreport.com/heathrow-airport-retail-revenues-fall-by-two-thirds-in-2020-as-it-challenges-government-abolition-of-200-million-tax-free-business/ https://www.moodiedavittreport.com/heathrow-airport-retail-r...

bobthepanda 5y ago

Airports benefit from having passengers come in, and so part of use it or lose it is ensuring that at very busy airports slots are as full as possible. Upstarts can and will take slots at such airports because they are worth their weight in gold; LHR to JFK makes $1B in annual profit for British Airways alone, for example. Airports also benefit from stability, though; airlines taking up a large percentage of traffic at a hub drive more traffic than if all those slots were split due to network effects. And to some degree people who transit airports tend to transit the same ones, so there are downsides to hectic, constant auctions of slots. The main issue is that COVID has made demand totally dry up across the board, and so the inherent assumption, that giving away a slot will bring in passenger traffic where there is none, has fallen apart.

bberenberg 5y ago
Can you share data source for 1B? This seems like it's 1-2 orders of magnitude off based on gut feel and I'd like to understand how I can be this far off.
- mastercheif 5y ago
  https://www.bloomberg.com/news/articles/2021-11-07/u-s-flights-reopen-handing-british-airways-1-billion-lifeline https://www.bloomberg.com/news/articles/2021-11-07/u-s-fligh...
  - temp_praneshp 5y ago
    To answer GP, revenue, not profit. "That’s the revenue that British Airways generated each year linking its London Heathrow hub and New York John F. Kennedy International Airport, where a healthy mix of tourist and business customers made it the most lucrative route on the planet"
  - maskedinvader 5y ago
    The Bloomberg article mentions $1 Billion in revenue annually though not profit.
- version_five 5y ago
  Just off the top of my head, one plane on a transatlantic route could be $250k+ in revenue right? So 12 flights a day would be $1Bn? A major route could have that kind of frequency. A billions dollars doesn't seem absurd.
  - loeg 5y ago
    GGP said profit, not revenue. GP is likely correct that profit would be an order of magnitude smaller.
    - version_five 5y ago
      Yeah I saw that after I posted (I misread it as revenue because that is what makes sense), I assume that's (revenue is) what the GP meant, and am realizing now that maybe the 1-2 orders magnitude comment was about the disparity between revenue and profit. The airline business is notoriously unprofitable, so yeah, the amount of revenue required to make a billion dollars profit would be something absurd, possibly more than the entire industry on many years
  - deleted 5y ago
    [deleted]
- Nbox9 5y ago
  $1B sounds like a lot, but New York to London is probably the single most profitable plane route.
- bobthepanda 5y ago
  I misspoke and meant revenue, but alas I can’t edit the post anymore.

diebeforei485 5y ago

Something like 5 or 10 years would work well. If an airline can't make the route work, they could then sell what's left of their slot to someone else - including to a cargo airline like DHL, FedEx, or even Amazon Air. Under the current system, legacy carriers got their slots for free or very cheap so they do wasteful things to keep their slots. They've been using smaller than optimal planes for years, and since the pandemic started the empty planes thing has gotten more common.

deleted 5y ago
[deleted]

Dylan16807 5y ago

Cargo, fine. Keeping pilots current and keeping planes in service? At least down to 10% slot use, I'd be surprised if that's a real issue.

WalterBright 5y ago

The beauty of using supply&demand to sort out all these conflicting priorities using price as the discriminator is it works better than any bureaucratic system ever has.

zinekeller 5y ago
> it works better than any bureaucratic system ever has. And there we go! While there's definitely cases where basically supply and demand trumps any other allocation system, in this case it will just kill competition and some will just hyperbole their expectations to win. Look at the UK's defunct rail franchising system where pure money play was used (they somehow always fails because they overbid).
- WalterBright 5y ago
  Any outfit going bankrupt buying landing slots will have those slots then sold to the next lowest bidder by the outfit's creditors. There are many stories of governments trying to half-bake a market system resulting in failure. You have to set that against the absurd result of 18,000 empty flights of a fully regulated system.
- vidarh 5y ago
  While I'm all for taking UK trains back under public control, note that one of the problems with the existing rail franchising system is that the franchise operators have almost no skin in the game. The trains and tracks are owned and operated by other companies. The franchise operators tends to be subsidiaries set up with very few assets, and can just be shut down if they fail. And while narrow margins of errors relative to their projections cause many of them to fail, when they succeed the profit relative to the actual investment made by the parent companies can be huge. The incentives structure has been all wrong in that there is basically no penalty for the parent companies in taking outsize risks and underfunding the operations and then walking away if they fail. Align those incentives and the rail franchising will likely still have issues but nowhere near as bad as today. E.g. if Deutsche Bahn faced having Arriva (their subsidiary which owns it's UK train operating companies) or themselves having to actually put up financial guarantees for the full period and facing long term effects on their ability to bid for future franchises, their bids would look very different. Put another way: When Virgin and Stagecoach were actually held to reasonable standards (being expected to actually properly fund pensions? the horror) which led to Stagecoach being disqualified from several bids they caused a massive stink and Virgin Trains closed.

jhoechtl 5y ago

> I don't know what incentivizes airports to take the "use it or lose it" model AFAIK airports charge airlines start and landing fees. By threatening airlines to loose their slots they ensure their steady revenue stream.

bobthepanda 5y ago
They do make money off of those, but they also make money off of all the people traveling through and purchasing duty-free or airport food and drinks and what have you. In 2019, Heathrow’s retail revenues were £722M, out of £3B in total revenue. https://www.moodiedavittreport.com/heathrow-airport-retail-revenues-fall-by-two-thirds-in-2020-as-it-challenges-government-abolition-of-200-million-tax-free-business/ https://www.moodiedavittreport.com/heathrow-airport-retail-r...